As predicted accurately by Asia’s Leading Investment Guru, Hu Li Yang, the Straits Times Index (STI) has travelled from a Box Bottom of 2,640 to Box Top 2,900. However, 3,000 seem to be a strong hurdle for the STI now. These few days, the STI has been hovering around 2,900. Take note that the STI has a series of resistances in the region of 2,900 to 3,000 while the Dow’s resistance is between 12,700 and 12,900. (Please see our chart on the STI below.)

If the Dow does not climb past 12,900, it seems unlikely that the STI will stay above 3,000 as well.

Some of you might ask, how can the STI and Dow cross their resistances then?

The United States (US) Economical reports from this Tuesday (31 January) to Friday (3 February) are extremely important and hold the key to whether both indices can cross their resistances. On 31 January, the Dow fell into the red after Chicago PMI reported a figure of 60.2 compared to analysts’ estimates of 63.1, reflecting a drop in the manufacturing business conditions. Chicago PMI is a monthly measure of the business conditions based on surveys of purchasing. It is important because it precedes the more anticipated ISM report on 1 February.

If the ISM report misses expectations, it would mean that we should not expect good results from any Enterprise Reports that will be released in February. That would not be good for this overbought market.

On 1 February, not only will the ISM report be released, we will also have to pay attention to ADP employment report, a precursor measure to employment reports coming up on 3 February.

Hence, we encourage all investors NOT to take up ANY NEW positions this week. Be patient.

US needs to show a better than expected employment result to cross the 12,900 points hurdle! Do keep a lookout for the non-farm payroll and unemployment rate reports to be released on 3 February.